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05DJIBOUTI559 2005-06-09 13:08:00 UNCLASSIFIED Embassy Djibouti
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E.O. 12958: N/A

1. (U) SUMMARY: New American investment has come to
Djibouti. Ali Toubeh, assistant to Saad Ahmed Cheikh - late
owner of COMAD and a prominent figure in Djiboutian
business - is carrying on Cheikh's last business venture.
North Holding Investment Share Company was created as a
subsidiary of the Virginia-based North Holding Investment,
Inc and is now under the leadership of Toubeh. With the
financial backing of two American institutions, Sovereign
Bank and Sofitel Capital Corporation USA, Inc, Toubeh is
continuing Cheikh's vision of a 60-hectare industrial park
on the outskirts of Djibouti City. The Industrial park will
start with a factory to create pasta and other foodstuffs
and a transportation division of 500 MACK trucks. The
second phase will include factories for textiles, paint,
and spare parts. Total jobs created for the initial phase
is projected at a minimum of 1,500 positions. The textile
factory will add another 1,400 minimum, along with several
hundred for each of the other two factories. The venture
has full backing from the Djiboutian Government, which gave
North Holding the land for free and a tax holiday for the
first ten years. Market studies for consumers in the COMESA
(Common Market for Eastern and Southern Africa) and
worldwide markets have been completed with projections of
high income for the venture. END SUMMARY.

2. (U) Several months before his death in April, Saad Ahmed
Cheikh had set-up a subsidiary of the Virginia company,
North Holding Investment, Inc (NHI) in Djibouti under the
name North Holding Investment Share Company (NHISC).
Securing financial backing from its American parent company
and other financial institutions was started before Cheikh
died. Saad's inheritors were not interested in pursuing the
business opportunity after Saad's death and the company was
dissolved. However, Cheikh's assistant and business
partner, Ali Toubeh, resurrected the venture. The company
was recreated in the same name and the deal continued with
the support of Cheikh's American business partners. NHISC
now is in the process of finalizing its financial support
from Sovereign Bank and Sofitel Capital Corporation USA,
Inc. It is also in the process of securing private
insurance for its loans.

3. (U) Cheikh's concept for the industrial park was in
alignment with President Ismail Omar Guelleh's development
objectives for his next six-year term. Toubeh's pitch to
the government garnered full support from the Presidency
and the Ministry of Finance. The Government has given NHISC
an investment incentive in the form of a temporary land
grant and a tax holiday for the first ten years of business
under the current investment code. NHISC is also authorized
to request an additional five-years of tax holiday should
it desire. The Government has also agreed to facilitate the
energy and water needs of the new complex, and all
guarantees in needs to secure the initial capital layout.

4. (U) NHISC aims to harness the expected success of the
upcoming oil and container terminals at the Doraleh Port
Facility. Djibouti's prime location along the Red Sea
shipping routes, and its potential as a future major trans-
shipment point, will also play in NHISC's favor. The
objective of the project is to create a transport system
that will serve the Ethiopian market and eventually that of
COMESA. The transport system projects acquiring a target of
500 MACK trucks over a five-year period to transport dry,
container, and bulk fluid cargo. Employment for the
transportation is expected to be a minimum of 1100 persons.

5. (U) The first phase of the industrial complex will also
include a Food Processing Factory, which will produce items
such as flour, pasta, macaroni, baby food, biscuits, and
cereals. The factory's products will be mainly for export,
but five percent is destined for the local market. Minimum
employment for this factory is estimated at 1000 persons.
Production goals are to reach 340 tons per day, according
to Toubeh. The Food Processing Factory will be complemented
by a Packaging Plant that will produce PP bags and other
kinds of packaging for finished products. Toubeh estimated
that once construction is complete, installation of
machines and other equipment will take nine months, putting
the project operational date at about a year and half from

6. (U) The plan includes creation of three other factories
two years after the initial phase becomes operational. A
textile factory will be built for garment transformation
and blankets at European and American standards. The
finished garments will be exported to the world markets,
including Africa. Employment is projected to be 3000 people
working three-shifts in a 24-hour operation. Toubeh said
that 70 percent of this workforce is expected to be women.
An auto-parts factory will supply various parts to COMESA
and world markets. Ninety-eight percent of production of
the auto parts will be for export, while two percent will
supply the local market. Expected employment is around 300
persons. The third factory is a state-of-the-art paint
production facility, which will target the world market and
employ around 600 persons.

7. (U) Due to the labor-intensive nature of the work
envisioned by Toubeh's projects, significant benefits for
the labor market are expected. Djibouti's economy is
currently 100 percent service-based. The addition of
industry jobs will greatly augment the number of potential
jobs in Djibouti. Toubeh said that all market studies had
already been completed and indicated a positive return on
all phases of the venture. He also specified that the
suppliers of the raw material for the factories will
provide the training necessary for the largely unskilled
labor force that will work in the factories. Toubeh
expressed hope that financing would be finalized by the end
of June and construction would begin at the end of 2005. If
all goes as planned, the initial phase should be
operational in a year and a half.

8. (U) Comment: While Doraleh remains the Government's
biggest priority, increasing investment and economic
opportunities comes a close second. Many are still unsure
if Doraleh's projected success will come to fruition. The
industrial park can provide a great benefit to the economy
in the form of increased employment and expendable income
that can further drive the need for services, and
tangentially, increase development opportunities.